What determines it’s an asset or a liability?

Source: Rich dad’s prophecy – ROBERT T. KIYOSAKI

Rich dad said, “Which direction the cash is flowing determines if something is an asset or a liability. Assets cash flow money into the income column. Liabilities cash flow money into and out of the expense column.”

Income statement & Balance sheet v2

The main point is that it is the relationship of cash flow between an income statement and a balance sheet that tells if something is an asset or a liability. If you stop working, assets will put money into your pocket, and liabilities will take money out of your pocket. If you stop working, assets feed you and liabilities eat you.

A liability is anything that takes money from your pocket. That means a personal residence, the dream of the middle class, is more often a liability, rather than an asset. If a person rented out that home and the rental income was greater than all the expenses, then that same home would shift from the liability column to the asset column.

Rich Dad's Prophecy

 


We make a living by what we get (donation)

When you give (money), you are abundance =)

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